By-the-Mile Auto Insurance Raises Privacy Concerns

By Jeanny HopperPublished: Friday, November 13th, 2009

The insurance commissioner for California has recently approved regulations for by-the-mile auto insurance which measures the premium of drivers according to the mileage they clock in annually. But critics say legislators have to consider the practice more carefully, saying the savings it gives to motorists may also cause privacy issues and security concerns.

The concept of usage based auto insurance has been around for years and is already practiced by several states in America such as Alabama, Colorado, Michigan, Louisiana, and Minnesota. Pay-as-you-drive (PAYD) has been proposed in California a few years ago but was rejected. Last year, state legislators began reviving the plan which has received approval from California Insurance Commissioner Steve Poizner this November.

Supporters of PAYD aim to limit the emission of greenhouse gases which are cited by experts as the primary cause of environmental deterioration. They believe that drivers who want to cut back on premium costs will reduce leisure driving. They likewise hope that it will help in solving the fuel crisis in the United States since drivers in general will be reducing fuel usage.

Providers of usage based car insurance policies compute the premium costs of a car owner according to the number of miles he drives each year through global positioning system (GPS) tracker. But some critics say that placing a GPS device to trace the whereabouts of a vehicle 24 hours a day is an infringement of privacy.

The insurance commissioner for California says insurers can verify odometer readings by comparing them with a technological device installed on a vehicle. They can also use low-tech methods with the aid of smog stations and repair shops. Vendors and agents are likewise authorized by new car insurance laws to do the verification. But California’s version of PAYD insurance prohibits insurers to use devices that would monitor the location of vehicles for rating purposes.

Consumer Watchdog, a non-profit advocacy group, says the restriction may do some good but it does not completely solve the privacy issues raised by PAYD. They add that it leaves the door open for insurers to later on lobby for changes that will allow them to use GPS and other high tech systems in monitoring the activity of motorists.

Another reason why consumer advocates oppose high tech tracking methods is the inaccuracy of those tracking devices. According to them, high tech methods do not measure actual risks, citing for instance that motorists who drive at high speed in a safe manner would be charged more than slow motorists who change lanes abruptly.